Archive for October, 2006

Mutual Funds: IFIC Response

October 1, 2006

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In response to the media criticism that Canadian mutual funds are world-beaters in mutual fund fees, the Investment Funds Institute of Canada has put out a press release pointing out that investors are confident about mutual funds. The release also points out that the benefits of mutual funds include “professional management, diversification and risk management, access to a wide range of investments, ease of moving within fund families and the ability to buy funds in small amounts”.

In the detailed report accompanying the press release, one question stands out with respect to fees. When asked if an advisor had a discussion about how he/she is compensated, 55% of respondents agreed and a significant minority of 42% disagreed. Note that 94% considered the advisor’s opinion when they last purchased mutual funds. Many investors are apparently unaware of that their advisor might have a conflict of interest in selling them a particular mutual fund.